Peak Oil is You
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Page added on July 18, 2013
Has Peak Oil Been Vindicated Or Debunked?
I will admit that I’ve always found the “Peak Oil” debate to be a little bit confusing, especially because both the words “peak” and “oil” turn out to have some ambiguity to them. But recently a couple of my favorite bloggers were debating the implications of the “unconventional oil” boom for the debate, with Karl Smith proclaiming peak oil dead while Noah Smith says it lives on. My approach would be to try to skip past some of these definitional issues and look at prices.
Above you see the nominal prices for Brent Crude Oil and West Texas Intermediate. As you can see, historically the prices are identical because oil is a globally traded commodity. You can also see that in the late 1980s and throughout the 1990s the price was low—around 20 dollars a barrel. These were the happy days in which the oil crises of the 1970s had been put behind us, and everyone got to hail the economic genius of Ronald Reagan and Bill Clinton. You can also see the supply disruption induced by Iraq’s invasion of Kuwait and the subsequent geopolitical crisis that left George H.W. Bush without the reputation for economic mastery that Reagan and Clinton enjoy. Then you see a rise, then a fall, then a steady rise. Eventually the rise gets really crazy and people are in freak-out mode. Then comes a global recession and a huge collapse in prices. At this point we look around the wreckage and wonder wtf just happened. Was there an amazing oil bubble comparable to Irish real estate? Or has the recession just pushed prices down artificially?
Now with some subsequent years of data we can see that despite the slow growth in developed countries prices have very certainly not returned to the halcyon days of the Reagan-Clinton years. We can see that the Iraq/Kuwait price spike actually looks like a bit of a joke. We can see the impact of the unconventional oil, which has created this anomalous gap between the WTI price and the Brent price. It’s a big gap. This is nothing to sneer at. Not only is it causing an economic boom in North Dakota and select portions of Texas, but it plausibly explains some of why America’s overall economic performance has been so much better than Europe’s. But even so, America’s oil boom hasn’t pushed U.S. oil prices back down to mid-aughts levels and it certainly hasn’t pushed U.S. oil prices back down to 1990s levels. The good old days of genuinely abundant liquid fuel really do appear to be behind us.
7 Comments on "Has Peak Oil Been Vindicated Or Debunked?"
Beery on Thu, 18th Jul 2013 6:00 pm
If peak oil were dead, oil would be trading at $20/bbl. It’s that simple.
GregT on Thu, 18th Jul 2013 7:29 pm
Yup, gas prices here have now surpassed the all time record high reached in 2008, at the beginning of the ‘global economic crisis’.
Plantagenet on Thu, 18th Jul 2013 7:36 pm
Peak Oil isn’t Dead and the US still needs an energy policy to deal with it. Maybe in three more years we’ll get a president who is smart enough to figure that out.
GregT on Thu, 18th Jul 2013 8:13 pm
Maybe Obama has read all of his briefings from the Joint Chiefs of Staff, his senior Science Advisor, Energy Advisor, Economics Advisor, and so on, and has come to the realization that no matter what he or anybody else does, that we are totally screwed.
socrates1fan on Thu, 18th Jul 2013 8:33 pm
GregT- I’ve often wondered if politicians do what they do because they know something we don’t.
Perhaps they know that there is nothing they can do about the energy shortages, so maybe they’ve decided to get as much as they can out of us before SHTF.
GregT on Thu, 18th Jul 2013 11:16 pm
Socrates,
One really should wonder, why no heads ever rolled after the sub-prime mortgage backed securities robbery.
BillT on Fri, 19th Jul 2013 1:18 am
Planet, right now I give the odds of even having another president in 2016 about 50:50. I don’t think the current one has any plans to step down. We shall see.